Preparing for Public Broadcasting’s Perfect Storm Staying Relevant in a World of Nonlinear Media The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not-for- profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep in sight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable compet itive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries. For more information, please visit bcg.com. Preparing for Public Broadcasting’s Perfect Storm Staying Relevant in a World of Nonlinear Media Antonella Mei-Pochtler and Tibor von Merey January 2014 AT A GLANCE A new wave of radical change sweeping the media industry—driven by digitization and changing consumer habits—presents an existential crisis for public service broadcasters. To stay relevant, public broadcasters must become leading providers of high-quality content to their target audiences across all media channels while still fulfilling their public-service mandates. Become Integrated Providers To adapt to the “always on,” borderless, and fast-paced digital world, many public broadcasters need to expand their reach into “nonlinear,” on-demand content that is delivered through PCs and a growing array of mobile devices. They must also break down the silos separating TV, radio, and online platforms and transform themselves into integrated content providers. Track Target Audiences Public broadcasters need a sophisticated understanding of target audiences and the economics of successfully delivering different genres of content via different media platforms throughout the day. We recommend an approach called media touchpoints; it measures audience relevance on the basis of how often a consumer comes into contact with different media platforms. 2 Preparing for Public Broadcasting’s Perfect Storm n recent decades, revolutionary change in the global media landscape has Iposed immense challenges to television broadcasters everywhere. But the impact has been especially traumatic for publicly supported broadcasters. Audience engagement with public TV and radio has declined steadily since the 1970s, in the wake of multiple waves of market liberalization and the advent of commercial television. Attempts by public service broadcasters (PSBs) to win advertising and wider viewership have failed to entirely stem the slide. Often, their approaches—ev- erything from introducing reality shows to airing displays of nudity—have fanned controversy. Now a new wave of radical change in the media industry is being ushered in by dig- itization and changing consumer habits. This time, PSBs are confronting a “perfect storm,” one that will force them to justify their very existence. Viewers, especially the young, are increasingly turning to a growing variety of new online-media out- lets. Well-capitalized, global players like Google, Netflix, and Apple, as well as a host of innovative upstarts, can stream virtually any kind of video or audio content on demand—including programming that was long available only on public sta- tions—through PCs and an array of mobile devices. What’s more, online media are often beyond the control of national regulators. The best way for pub- lic broadcasters to re- PSBs face an uphill battle as they attempt to make the transition to the “always main relevant is to be on,” borderless, and fast-paced digital world. Most PSBs have been slow to move be- leading providers of yond the “linear” world, in which their audiences can tune into TV and radio pro- high-quality content grams only at specified times on specified channels. They lack the financial resourc- valued by target audi- es to compete with large global corporations in the new war for high-viewership ences—while fulfilling content. What’s more, their freedom to offer programming and compete for digital their mandates to advertising revenue is typically constrained by government regulation. provide public service. The best way for public broadcasters to remain relevant is to be leading providers of high-quality content that is important to their target audiences—while fulfilling their mandates to provide public service. PSBs by no means should exit the tradi- tional business of delivering national and regional TV programming, which will continue to command large followings for at least the rest of this decade. Rather, they must strengthen their online activities to become integrated providers of con- tent across all media. And they must extend their reach across multiple channels in order to reach all age groups. Adapting to this new game will require an in-depth and sophisticated understand- ing of target audiences and the economics of successfully delivering different The Boston Consulting Group 3 genres of cross-media content. Each PSB should identify those programming genres in which it should strive to be a content leader—as well as those in which it can af- ford to be a follower. Each PSB must also learn how to maximize its investments by understanding the costs and benefits of providing content. Decisions about investments in content should be based on a keen understanding of what marketers refer to as the “customer journey.” How do target audiences con- sume media throughout the day? When do they come in contact with certain genres of content—such as news, sports, or music? And which media platforms are they us- ing at each point in this daily journey—radio, TV, print, or online? To acquire this knowledge, we propose that PSBs adopt a metric called media touchpoints that measures the relevance of programming to target audiences across all media. Currently, most PSBs use a siloed approach for measuring relevance and making content decisions: First, they set budgets for purchasing or producing differ- ent genres of TV, radio, or online content. Second, they sell advertising based on conventional measures of audience viewership, such as audience share ratings or clicks online. By contrast, under the media touchpoint approach, audience relevance is measured on the basis of how often a consumer comes into contact with different media plat- forms. It also measures how many of these touchpoints are generated by the PSB across all media—whether via PCs, smartphones, radios, living-room TV sets, or other devices. (See Exhibit 1.) Exhibit 1 | Which Content Do Consumers Access When—and Through Which Media? Platform Morning Noon Afternoon Evening Watches TV TV Radio Listens to news on radio Online Reads online news during break Mobile Checks Facebook Streams music Uses social media during breakfast app on the train on second screen ride home The media touchpoint method measures media contacts every 30 minutes across all platforms, genres, and devices Source: BCG. 4 Preparing for Public Broadcasting’s Perfect Storm Armed with such intelligence, PSBs can then analyze the costs and benefits of pro- viding certain genres of content over each media platform. In so doing, PSBs can significantly improve their odds of making smart bets on both conventional and digital programming. Making the transformation from organizations with a linear concept of TV or radio programming to the nonlinear, digital, and multimedia world is not easy for com- mercial broadcasters—let alone corporations that operate under public oversight and must fulfill public mandates. But the pressure to do so will only intensify as online viewership of programming becomes the norm. The time for PSBs to act is now. The Mounting Challenges for Public Broadcasters Four decades ago, public TV and radio were fixtures inside households around the world. In much of Japan and Europe, in fact, government-funded TV monopolized the airwaves because commercial television had not yet been permitted. From the beginning, the mandate of PSBs was public service. The guiding principles of PSBs in most nations include providing programming that is widely accessible, that ap- peals to general tastes, and that contributes to a sense of community. To maintain a distance from vested commercial interests, PSBs operate under various advertising restrictions from government regulators. As a result, public broadcasters have relied heavily on funding from governments, viewers, and licensing fees. By and large, this basic PSB framework remains in place today. The ensuing decades, however, have brought three waves of change that have fun- Nonlinear platforms damentally transformed the broadcasting industry, with significant implications for are breaking down the PSBs. The first wave was market liberalization, which took hold as governments in traditional boundaries Europe and Asia authorized commercial radio and TV stations that targeted the of TV, radio, print, and mass audience. In the second wave, which began in the 1980s, cable and satellite online and allowing TV brought ever more channels into viewers’ living rooms. Offerings included not consumers to receive only international mainstream channels in English, German, and French but also practically any kind of niche channels that offered the same kind of public-interest programming offered content whenever by PSBs. they want. These first two waves of change largely explain the steady